Health care business consultant and policy expert David E. Williams share his views

New York Times is 7+ months late with H.P. Acthar Gel story and still misses the point

In August, Questcor Pharmaceuticals announced â€œa new strategy and business model for H.P. Acthar Gel(R). Later that month you may have read my post (Abusing the orphan drug law to rip off customers), which explained how the company obtained orphan drug status for a product that had already been used for decades for Infantile Spasms (the orphan indication) and raised the price from $1600 to $23,000 per vial.

There’s a lot to explore in this story, and other bloggers have probed the issues more extensively than I have. (See the comments section of the original post for some of them.) For example: is it reasonable to use orphan status –designed to encourage development of new products– to boost the profitability of older products and potentially keep new products off the market? What are the alternative treatments for Infantile Spasms? How well do patient assistance and other price discrimination programs work in practice? How does Questcor’s inconclusive clinical trial for Infantile Spasms figure in?

The New York Times was working on a story about this topic during the fall. I know because I spent quite a bit of time educating a reporter about Questcor and H.P. Acthar. For whatever reason, the story never ran. That’s how it goes sometimes. (It wasn’t among all the news that was fit to print, I guess.)

So I was surprised to see the story in Saturday’s New York Times (Benefit Managers Profit by Specialty Drug Rights) and disappointed that the writer (a different one than I spoke with) ignored the Questcor and orphan drug law issues and focused instead on the distribution of specialty pharmaceutical products by pharmaceutical benefits managers. Here’s how the Times handled it:

As it turned out, the exclusive distributor of H.P. Acthar Gel is Express Scripts, a company whose core business is supposed to be helping employers manage their drug insurance programs and get medicines at the best available prices.

But in recent years, drug benefit managers like Express Scripts have built lucrative side businesses seemingly at odds with that best-price mission. A growing portion of their revenue comes from acting as exclusive or semi-exclusive distributors of expensive specialty drugs that can cost thousands of dollars. And the prices of such medicines are rising much faster than for the mainstream prescription drugs available through a wide variety of distributors…

“We are headed right down into conflict alley with these exclusive arrangements,” said Gerry Purcell, an Atlanta-based health benefits consultant to big employers. As exclusive or semi-exclusive distributors of specialty drugs, the benefit managers “can raise the prices at will,” Mr. Purcell said, “and the employer will have little chance but to pay the bill.”

The Times implies that Express Scripts is responsible for the price increase, and that the exclusive distribution arrangement drives prices up. It’s an odd way to focus the article.

It’s typical for specialty drugs to have a sole distributor and such arrangements have almost nothing to do with why specialty drugs are so expensive. Even if H.P. Acthar Gel were distributed widely it wouldn’t mean customers would pay less. The pricing power in this case is at the level of the manufacturer, not the distributor. (As an analogy, think of Microsoft Office. It’s available from many distributors, and prices do vary somewhat. However, Microsoft controls the wholesale price and can boost it or cut it at will. Distributors have little power.)

There are alternative treatments to H.P. Acthar Gel, including steroids and the ketogenic diet. Specialty distributors and PBMs who are locked out of the Questcor account have an incentive to promote such alternatives, which could be to the benefit of their customers and themselves.

In Questcor’s initial press release the company mentioned a number of risks inherent in the price boost, including the possibility that insurers would resist the price increase and that negative publicity would cause problems for the company. Neither of those things seems to have happened to any great degree, and the delayed, New York Times article, which points the finger in the wrong direction, is part of the reason.

3 thoughts on “New York Times is 7+ months late with H.P. Acthar Gel story and still misses the point”

I have continued to follow the whole Questcor/Acthar Gel developments since August, although I haven’t blogged anything new since mid-December.

Once Questcor announced their annual earnings, it was expected (in the investment arena) that the response would be rather positive. However, the stock dipped a bit. Questcor announced a stock buyback and the price has basically stagnated.

Investors have been talking about wanting to have more coverage to get Questcor on everyone’s radar (for investing.) Perhaps this was a very lame attempt to covertly get Questcor’s name out there to a greater audience.

On a human interest level – my son was diagnosed with Infantile Spasms this past November. The name sounds innocent enough…but the reality of the diagnosis is staggering. IS is a catastrophic seizure disorder which left unchecked will lead to permanent brain damage & possibly death. Acthar Gel is the front-line treatment.
My family went through hell trying to get insurance approval for his treatment. Partly because it is not FDA approved for this conditon (altho there are NO FDA approved treatments)…but also due to the outlandish cost. We were asked to pay $40,000 per vial out of pocket. Trevor needed FIVE! We felt powerless to help our son, whose 7 1/2 month old baby body was being wracked by 40+ brain-crippling seizures a day.
I recently emailed our ACTH story to a neurologist with Miami Children’s who emailed the following in response…

” One option that has been confirmed recently is the option of importing synthetic ACTH through Caligor pharmacy. They have a legal mechanism to import non-FDA approved medicines (which are therefore usually illegal to sell in the US). By doing this, it will cost patients around $600 per vial. The problem is that this still has problems: namely that the medicine will not be paid for by insurance when it’s a non-FDA approved med.”

I was shocked by this news! I wish we had known last November! I am on a mission to inform other parents who might be in the same situation of any other options! Thus my comment to this post.